Refco redux: Weil witnesses will be key if Collins retried

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The U.S. Court of Appeals for the Second Circuit overturned the fraud conviction of former Mayer Brown partner Joseph Collins Monday because the Manhattan federal judge who oversaw the end of Collins’s 2009 trial, U.S. District Judge Robert Patterson, didn’t call in defense lawyers when he advised a dissident juror to resume deliberations. The Second Circuit’s 23-page opinion makes for pretty dramatic reading; the juror came to see Patterson with an account of being harassed and threatened for disagreeing with fellow jurors in the course of four days of deliberations. The jury foreman also sent notes to the judge pleading for help in defusing tensions in the jury room. Rarely are we privy to such a vivid, well-documented account of jury-room dynamics.

But if Collins — who was sentenced to a seven-year prison term but has been out on bail pending appeal — is retried, we should get to see an equally vivid fight over whether he engaged in criminal conduct when he decided not to disclose a side agreement between his client, Refco, and the Austrian bank known as Bawag to T.H. Lee, the private equity fund that led a 2004 leveraged buyout of Refco. As Patterson has said, “The evidence which led principally to [Collins's] conviction was his admitted, intentional determination to not disclose the existence of the [side deal].”

That dispute will once again pit Collins against two Weil, Gotshal & Manges partners, who represented T.H. Lee in the LBO and testified at Collins’s first trial that the so-called “upstream” Proceeds Participate Agreement had been hidden from them. This time, however, Collins’s lawyers from Cooley will have some new evidence, uncovered after the first trial, to counter key elements of the Weil testimony.

Cooley argued at Collins’s 2009 criminal trial that the Mayer Brown partner made a judgment call, as a corporate lawyer, about his disclosure obligations, and that his legal reasoning certainly didn’t amount to abetting Refco’s fraud. (Here’s Collins’s 133-page appellate brief, which lays out, in detail, his explanation for not disclosing the Bawag agreement.) But prosecutors argued that Collins covered up the side deal because he was helping Refco defraud Lee and other investors. To support that argument, they relied heavily on testimony from Weil partners Jay Tabor and James Westra, as well as T.H. Lee principal Scott Schoen. All of them said the side agreement with Bawag was critical and Collins effectively hid it from them.

Tabor’s testimony was particularly effective in undercutting Collins’s defense. Collins had asserted that in April 2004, Refco’s CEO told him that he’d reached an agreement with Schoen of T.H. Lee not to disclose so-called “upstream” agreements like the Bawag side deal. Collins said that he, like T.H. Lee, was a victim of the Refco CEO’s deception. But Tabor testified that Collins lied to him before the Mayer Brown partner’s supposed April conversation with the Refco CEO. According to Tabor, he specifically asked Collins about certain categories of documents, which would have included the relevant side deal, in March 2004. Tabor testified that Collins said there weren’t any. “If you believe Jay Tabor,” prosecutors said in their closing argument, “it is over. The defendant is guilty.”

Expect that crucial Tabor testimony to be put to the test if Collins is tried again. After he was convicted, defense counsel at Cooley asked Patterson to order a retrial based on new evidence on the timing of Tabor’s discussion with Collins that had emerged in Refco civil litigation. “The new evidence — which includes numerous internal Weil Gotshal emails and handwritten notes makes clear that the conversation could not have taken place in March [2004], and thus confirms Collins’s account as opposed to Tabor’s,” the brief said. “The new evidence is dispositive and would have put the issue to rest, establishing Collins’ credibility on perhaps the central issue in the case: whether he had a good-faith justification for non-disclosure of the [side agreement].”

Patterson denied Cooley’s motion, but Monday’s Second Circuit ruling remands the Collins case for retrial. Prosecutors declined Reuters’s request for comment, so it’s not a sure thing he will be tried again, but if he is, the Weil witness will undoubtedly be back on the witness stand.

Collins counsel William Schwartz of Cooley was unavailable for comment. Tabor referred my call to Weil’s internal general counsel, Mindy Spector, who said only that any decisions about testimony from Weil partners will be up to prosecutors.

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Alison Frankel updates On the Case multiple times throughout the day on WestlawNext Practitioner Insights. A founding editor of the Litigation Daily, she has covered big-ticket litigation for more than 20 years. Frankelâ€™s work has appeared in The New York Times, Newsday, The American Lawyer and several other national publications. She is also the author of Double Eagle: The Epic Story of the Worldâ€™s Most Valuable Coin.